Thursday, April 14, 2016

Michael - Thursday

This week the focus has been on the greed and tax avoidance
practiced by the world’s rich through tax havens like Panama. It’s a nasty story, with megawealthy people
hiding their profits and assets behind a veil of offshore
secrecy. But disgusting as it is, some
people aim much higher. Why hide and avoid the government when you can actually
take it over? This sort of activity even has a name – state capture. We’re not talking about the Republican Party
leaders with an (at least partly) open policy to reduce taxes on the rich, we’re talking about people deliberately setting out to
twist government policy to their will – with the one objective of making them
super rich and super powerful. Enter the Gupta brothers.

Atul, Rajesh and Ajay Gupta

As with most stories, there are two sides depending on who
is telling it. From the family’s point of view, three brothers came here at the
dawn of the new South Africa to make their fortunes in what was then Africa’s largest
economy. By dint of hard work, good management, and a little capital, they built Sahara computers from scratch – an offering of cheap imports and locally
assembled products. From there they
went on to mining, energy, a newspaper (which supports the ANC government), a
news channel (which supports the ANC government) and so on. They became South African citizens and aligned themselves with the country. That’s all true, although they started with
rather more than a little capital. But
there’s more to it.

President Zuma and Ajay in happier times

They made it their business to get close to the government
and to the heirs apparent. Early on they
spotted two things about our current president, Jacob Zuma. First, he's a tenacious
political infighter with a wide net of influence built across the party and
across family relationships, and second he is corruptible. Suddenly his son was a director of, and then
participant in, their mining business. They
supported Jacob Zuma in his struggle to oust the previous president Thabo Mbeki from the party leadership. Almost as soon as Zuma became leader of the
ANC, his daughter became a director of the computer business. The Guptas were backing the right horse.

The happy couple

The brothers, now extremely wealthy, were happy to oil
wheels for the president when things got sticky. No doubt the favors flowed
both ways. But they went over the top. They used a South African military air base to fly in guests from India for one of their
daughter’s lavish wedding. The public outcry at this became known as Guptagate,
and even the president felt things had gone too far. He cancelled his attendance at the wedding, demoted the official who had arranged permission for the landing, and things got chilly for a while.

Cartoonist Zapiro's take on the wedding

Modest home in the suburbs

There have been rumors of private meetings and parties in
the Gupta’s four mansion compound in one of Johannesburg's poshest suburbs, where inappropriate discussions were held
about political decisions and appointments. At last the deputy minister of finance came clean and admitted that a
Gupta brother had offered him the Finance ministry. Zuma was elsewhere in the house at the time. To his credit, he turned the offer down, but
said nothing. I guess a business empire
appointing the finance minister would be as good a definition of state capture
as you could come up with.

A word in your ear, Mr. President

But that revelation was a bridge too far. Zuma has been personally weakened by the Nkandla
debacle, but his party rallied behind him. Until last week, it was widely believed that the money Zuma would be forced to pay back for his Nkandla extravagances would be covered by the Guptas. But already the ANC was joining the opposition
in decrying the brothers’ behavior with cries of "South Africa is not for sale!" After all, with their political clout gone, what did they have
left? Not family ties. Not so called struggle credentials - they came
to South Africa as a land of opportunity not to help overthrow apartheid. They are, in the end, foreigners, and
foreigners can make easy targets.

Last week in response to the state capture revelations, all
the country’s major banks closed the Gupta's accounts and severed ties with the
brothers and their companies.

The Gupta's resigned their directorships and the word is that the companies will be put up for sale. No doubt some rich pickings to be had for the
remaining well-connected.

On Sunday a large van arrived at the Gupta compound, loaded
up “enough luggage for twenty people” and headed off to the airport where the
Guptas keep their private jet. Shortly
after that they were heading for Dubai where the family has established a
parallel home.

11 comments:

Holy MOLY, Michael! What a story! And they get away scot free! But at least they will be out of South Africa. And good for the people who contributed to their exit. But SHEESH!! I am reading this just before lunch time in NYC. I am too nauseous to think about food after reading about all those disgusting people.

Actually, Stan, until I read this, I thought it was the antibiotics that were upsetting my tummy. "Take them with food," was advice the dentist gave me. This post has made that even more difficult than it already was. It should come with a warning.

Well, I've already been proven wrong. According to a newspaper report today, the once and future finance minister just delivered $400 million to Dubai in person. So they didn't wait for the money to be sent on!

Looks like the R6 billion rand story is a rumor based on a claim by one of the opposition parties. So maybe not. On the other hand, they were the ones who first announced that the Guptas were leaving South Africa.